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CONTENTSExecutive SummaryAn Overview of Carbon Emissions in BrazilThe Role of Banks in Real-Economy DecarbonizationNew Market DynamicsImplications and Next Steps for Banks 357920 © Oliver WymanEXECUTIVESUMMARYGiven Brazil’s abundance of natural resources, large population, and emerging industries,it can and should play an important role in the decarbonization of the global economy. And,as proprietor of 60% of the Amazon, the largest rainforest on Earth, nowhere could Brazil’sunique influence be more evident than in its potential to protect the planet’s natural capitalthrough active efforts to prevent deforestation and preservebiodiversity.Historically, Brazil as a leading emerging market has been a pivotal protagonist in thefight against global climate change. The country has been a signatory to the UnitedNations Framework Convention on Climate Change (UNFCCC) since 1992 and ratified thegame-changing 2015 Paris Agreement. It also has been steadily toughening its nationallydetermined contributions (NDCs) that currently call for cutting emissions 37% by 2025 and50% by 2030 and reaching climate neutrality by2050.While many developed countries still need to decarbonize large portions of their energyand power sectors, Brazil already boasts a highly attractive renewable energy matrix (88%),thanks to its abundance of hydropower and recent investments in solar and wind, andsignificant use of biofuels representing one-fifth of the volume of fuels consumed in thecountry. If it can limit deforestation, apply low carbon techniques on a large-scale acrossits agricultural sector, in large scale, and realize its potential to generate carbon offsetsbased on nature, Brazil has the potential to become one of the first countries in the worldto achieve its net zero commitments. But those are not insignificant goals to achieveandwill require strong commitments from the government, industry, and the financialsectorto moveforward.To fulfill its potential and capture the enormous benefits from a greenereconomy,Brazil will need to mobilize a significant amount of capital in the next years. By 2030alone,Oliver Wymanestimates that the required investment to achieve national transitiontargets amounts to approximately one trillion Brazilian real, or about $208 billion. This levelof investment will necessitate both public and private flows of capital into the most relevanteconomicsectors. © Oliver WymanTHE ROLE OFBANKSAware of this requirement and the potential benefits from the decarbonization of theBrazilian economy, banks are recognizing the significant role they must play in financing thetransition, given their expertise and access to capital. Their lending and investment policiescan also influence the behavior of other industrial and agricultural sectors. Bottom line, thetransition to a low-carbon economy will not happen without them as vital players in themix.As Brazilian banks prioritize sustainability and decarbonization as part of their commercialstrategy, several key dynamics are reshaping the landscape and fostering a more sustainableand resilient financial ecosystem. These include an evolving regulatory environment, newfinancing approaches, and the emergence of alternative financing opportunities and tools.Understanding these dynamics is crucial for Brazilian banks to navigate the changinglandscape, seize opportunities, and effectively contribute to the transition toward a low-carbonfuture.After assessing the challenges and opportunities ahead, a fundamental first step is foreach to operationalize sustainable strategies across their business units that establish newways to assess and manage climate-related risks, review and update credit policies, andengage and incentivize commercial teams to prioritize sustainable financing. They mustalso proactively structure a diverse range of innovative products and services that meetthe evolving needs of climatetransition.As the nation strives to achieve a greener economy, Brazilian banks must embrace theirpivotal role in decarbonization and actively incorporate sustainable practices. By leveragingtheir expertise, resources, and influence, banks can be catalysts for the transformation andbecome the building blocks of a thriving low-carboneconomy. © Oliver WymanAN OVERVIEW OF CARBON EMISSIONS INBRAZILUnderstanding the current state of carbon emissions is crucial for comprehending theurgency and magnitude of the decarbonization challenge that Brazil faces, as well as theimportance of investments in financing thistransition.Brazil’s greenhouse gas (GHG) emissions emanate from across the nation’s vast economy,including agriculture, energy, and industrial processes to name a few sources. Allowing thecurrent level of emissions to perpetuate would eventually doom Brazil and the planet tosuffer severe environmental consequences. Including rising sea levels that would threatenlow-lying populations, life-threatening heatwaves, and dramatic transformations of habitatthat lead to the extinction